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Collectibles

Published on September 15, 2003.

Limited-edition collectibles—plates, figurines, dolls, books and the like that are issued for the purpose of collecting rather than for use—most often are targeted at adults. The market is divided into two parts: the "first-issue" segment, which consists of items produced as collectibles that may increase in value, and the secondary segment, items that are bought, sold and traded among collectors.

First-issue collectibles are normally released in limited-edition series. Primary means of communication with collectors include Sunday newspaper magazines, women's and specialty magazines, such as TV Guide; newspaper inserts; and database-driven collectors clubs established by marketers.

While the 1990s saw a tremendous growth spurt in collectors clubs, the collectibles business already had been around for some time. Enesco Group was founded in 1958, the Franklin Mint in 1964, Danbury Mint in 1969 and Bradford Exchange in 1973.

Collector clubs

Affinity marketing to collectors clubs via direct mail is a key sales tool in the collectibles market. Some such offers take the form of continuity programs, especially in the case of limited-edition series. Customers who buy the first in the series automatically receive subsequent series releases, with the option of returning the object without payment. These offers tend to be marketed through mail order, while direct-response newspaper ads feature individual items.

Clubs are important marketing tools because they generate increased loyalty and spending among members, who tend to be the best customers for collectibles marketers. A typical collector maintains four to five separate collections, and collectors who belong to clubs spend about three times as much annually on their collections as non-club members.

Enesco Group, with annual sales of $400 million to $500 million, formed the Precious Moments Collectors Club in 1981—three years after introducing the first licensed Precious Moments figurines. By 1994, the club had 500,000 members. In 1985, the marketer established the Enesco Precious Moments Birthday Club to encourage children to collect its figurines.

Collectible toys

A robust secondary collecting market for items such as dolls, trading cards and comic books also developed in the mid-20th century. However, those items were not marketed as collectibles until the late 1980s, when comic book, trading card and toy marketers started to issue limited editions made specifically for collecting (with artificial scarcity built into the design) in order to capitalize on the rise of the collecting hobby. (Prior to that, the products were intended for reading or playing with, not for collecting.)

Both Mattel and Hasbro increased their participation in the collectibles industry in the 1990s by issuing limited editions, pricier versions of the toys that baby boomers remembered from their childhood. In 1998, the 30th anniversary of the toy's introduction, 10,000 collectors attended Hasbro's first G.I. Joe International Collectors Convention. Hasbro's G.I. Joe Classic Collection consisted of foot-tall dolls, such as those issued in the 1960s, selling for five to 10 times more than the action figure-sized versions the company was marketing to children.

By 1997, a Hasbro-sponsored study conducted by Unity Marketing found that 40% of the $2.1 million U.S. action figure market was made up of products purchased as collectibles. The typical collector, a male ages 18 to 40, spent between $1,000 and $2,000 on collectible action figures.

Meanwhile, Mattel was creating a large collector market for its Barbie dolls. It introduced its holiday limited-edition Barbies in 1988 and its Barbie Collectibles brand in 1993, starting a database-driven Barbie Collector Club to market its special limited editions, which retailed for up to $900.

In 1995, Mattel launched its first ad effort targeting adult collectors, a print campaign supporting the Barbie Collectibles brand. The black-and-white ads, which ran in People and women's and Sunday magazines, were tagged "You're never too old for Barbie." Ogilvy & Mather, which handled Barbie toy advertising along with Foote, Cone & Belding, created the collectibles effort. Mattel also supported the Barbie Collectibles brand with sweepstakes and infomercials.

In the midst of the collecting boom in the mid-1990s, the five largest collectibles specialists—Franklin Mint, Bradford Exchange, Danbury Mint, Hamilton Collection (since 1997 part of the Bradford Group) and Lenox Collections—spent $377.8 million combined in measured media, according to Competitive Media Reporting. Franklin Mint accounted for $147.2 million, or 39% of that figure. (The company's advertising was handled in-house.)

Additional spending came from other marketers of first-issue collectibles, including social expressions companies such as Hallmark Cards with its Keepsake Ornament line; die-cast vehicle marketers such as Ertl and Racing Champions; gift marketers such as Enesco and Hammacher Schlemmer; toy companies such as Mattel and Hasbro; and plush-toy marketers such as Applause and Steiff.

Plush-toy marketer Ty Inc. was an exception; sales of its collectible Beanie Babies grew without benefit of ad support. The company relied instead on word of mouth. Ty did, however, take advantage of promotional alliances, especially a series of tie-ins with fast-food giant McDonald's.

Lenox Collections is typical of collectibles marketers in its use of a variety of direct-response media to reach its target audience, women ages 45 to 60. The direct marketing division of china manufacturer Lenox Inc., Lenox Collections, was founded in 1982 to sell collectibles such as sculptures, figurines, home decor and jewelry. It mails more than 1,000 direct-mail packages a year and runs more than 900 print ads.

Lenox's parent, Brown-Forman Corp., handled its advertising in-house. Its six catalogs a year-the first went out in 1989-are sent to a total of 10 million names and account for 20% of the marketing mix, with the bulk of the remainder devoted to print coupon ads and noncatalog-related direct-mail efforts. As with other collectible companies, TV and other media represent a small proportion of spending.

Market decline

After a decadelong run of substantial sales increases, the first-issue collectibles market started to decrease in 1999; sales were down 2% from the peak year of 1998. Reasons for the decline included the end of the Beanie Babies fad (Ty discontinued the original line in 1999) as well as competition from the secondary collectibles market—especially via the Internet—and softness in sales by some of the market leaders, such as Mattel and Hasbro in the collectible doll sector.

The market contraction was accompanied by several industry changes. First, the product mix changed. In 1994, figurines were the biggest segment, with 41% of total sales, followed by dolls with 23%, plates with 8% and cottages (collectible ceramic buildings marketed by companies such as Department 56) with 6.5%, according to Unity Marketing. In 1999, figurines and dolls remained the top categories in market share, but sales were down 7% and 12%, respectively, from a year earlier. Meanwhile, such collectibles as ornaments, boxes and musical items increased in popularity.

As a result of soft industrywide sales, some marketers saw significant declines in their individual financial performance. Enesco's sales dropped 15% and profits 52% in 1999, causing the company to discontinue some of its collectors clubs. The downturn was reflected in ad spending as well. Franklin Mint's expenditures in Sunday magazines, for example, were down 37.4% in 1999 from 1998.

As direct-response spending fell, marketers increased their focus on retail sales. Lenox Collections set up a retail division of its own in 1997 and changed its product mix to appeal to retail as well as direct-response customers.

New outlets

Collectibles began to move primarily from specialty distribution into new channels, such as department stores and in particular mass-marketers. Those retailers embraced collectibles, which they had identified as a growing market and one that would bring new customers into their stores.

Enesco and Hallmark both introduced collectibles into drugstores and large national mass retailers for the first time in the late 1990s. Some chains made Hallmark's Keepsake Ornament line the focal point of their advertising and promotions during the end of the year holiday season.

The Internet proved another important distribution-related change in the collectibles market in the late 1990s, which occurring at roughly the same time as the downturn in industry sales. A portion of ad spending moved to the Web. Lenox Collections, for example, which built a Web site for its collectibles and figures in the late 1990s, advertised the site on other Web sites and portals, including using banner ads on About.com and Lycos.com.

Hasbro launched HasbroCollectors.com in November 1998 to offer information about its collectible products, such as details of manufacture, quantities and dates of availability.

Third-party collector sites also have generated interest among collectors. CollectibleTown.com, launched in 2000, sold branded collectibles from Walt Disney Co., Warner Bros., Lenox, Ertl, Christopher Radko, Hummel and about 70 other suppliers for a total of more than 10,000 dolls, figurines, plates, crystal pieces and sports memorabilia items. Before it folded in January 2001, CollectibleTown.com's competition included Collectibles.com; Collectiblestoday.com, owned by the Bradford Exchange; and Gocollect.com, a network of 600 specialty collectibles retailers.